How will autonomous vehicles affect auto insurance in Canada?

With files from jpcrete

This article was published on December 21, 2018 and was updated on September 19, 2025

Autonomous vehicles, also called self-driving cars, are edging closer to becoming part of everyday life. Thanks to leaps in artificial intelligence and sensor technology, self-driving cars are no longer just science fiction, although the reality is still in its early stages in Canada.

As autonomous vehicles roll onto Canadian roads, they bring new questions for drivers, lawmakers, and insurers, including uncertainty around who’s at fault if a self-driving car crashes. Liability has always rested with drivers, but as machines take on more control, car insurance companies could shift the responsibility of third-party liability coverage toward manufacturers, software developers, or even the car itself.

What are autonomous vehicles?

An autonomous vehicle (or self-driving car) is a vehicle that can perform driving tasks with little or no human input. The Society of Automotive Engineers (SAE) defines five levels of automation:

• Level 0: No automation – the driver is in full control.
• Level 1: Driver assistance, like adaptive cruise control.
• Level 2: Partial automation, where the car can steer and control speed at the same time (Tesla Autopilot falls under this level).
• Level 3: Conditional automation – the car drives itself in certain conditions, but the driver must be ready to take over.
• Level 4: High automation – the car can handle almost all driving tasks, but only in specific areas or situations.
• Level 5: Full automation – no steering wheel needed, the car drives itself everywhere.

Right now, most cars on Canadian roads are Level 1–2. 

Who is developing self-driving vehicles?

The race to build self-driving cars is global. Big names include:

• Tesla,with Autopilot and Full Self-Driving (FSD) software, although still technically Level 2.
• Waymo, Google’s self-driving project, operates fully driverless taxis in parts of the U.S.
• Traditional automakers, such as Ford, Toyota, and Mercedes-Benz, are investing heavily in autonomous vehicle technology.

Canada isn’t just watching from the sidelines. Ontario has allowed autonomous vehicle testing since 2016 and is home to innovation hubs such as the Waterloo Centre for Automotive Research (WatCAR) and the Ontario Vehicle Innovation Network (OVIN), both working with automakers and tech firms to advance the technology.

What is the landscape of autonomous vehicles in Canada in 2025?

Canada’s rollout of autonomous vehicles is cautious and uneven across provinces. Here’s how things look across the country, as of 2025:

• Ontario: Level 3 vehicles are currently allowed on the roads. The province has allowed autonomous vehicle pilot testing since 2016, and testing permits continue under strict rules.
• Quebec: Level 3 vehicles are currently allowed on the roads. The province supports autonomous car research but has limited on-road pilot activity.
• British Columbia: The province allows testing with a safety driver present, but does not permit public operation of Level 3 or higher.
• Alberta: Several trials are taking place in the province, including the use of a self-driving shuttle.
• Manitoba: The province allows autonomous vehicle testing through the Vehicle Technology Testing Act (2021).
• Saskatchewan: The province allows autonomous vehicle testing through a 2020 amendment to the Saskatchewan Traffic Safety Act 
• Atlantic provinces (NB, NS, PEI, NL): Minimal activity that is limited to research discussions.
• Territories (YT, NT, NU): No current legislation for autonomous cars.

How will self-driving cars impact car insurance in Canada?

Self-driving cars have the potential to shake up the entire insurance industry. Right now, car insurance liability is simple: drivers cause accidents, and insurers cover the damages. But autonomous vehicles flip that model on its head. 

If the car is making the decisions, who is at fault when something goes wrong? The answer could be the manufacturer, the software developer, the sensor maker, or even the driver in certain cases. 

This shift in liability raises big questions about who pays, how claims are handled, and what driverless car insurance will look like in the years to come.

Here are some changes we could see in the coming years:

Shift in liability

Crashes involving self-driving cars will inevitably raise questions around determining fault. Was it the driver’s fault, or a system error? If the technology fails, the carmaker or software provider could be responsible. A no-fault insurance system could be the answer, but that remains to be seen. 

Who pays claims?

Today, your insurer pays out if you cause a crash. In the future, insurers may still pay claims upfront, then go after the manufacturer for reimbursement through product liability claims. This could make the process slower and more complicated for drivers waiting for a resolution.

Insurance liability challenges

Self-driving cars will force insurers to rethink policy wording. For example, a driverless car insurance product may need to cover both human error and system failure. Manufacturers might even bundle insurance with their vehicles, eliminating the need for traditional insurers.

Predictions for the future of auto insurance

While no one has a crystal ball, here’s what experts predict:

Manufacturer-provided coverage

Instead of buying your own auto policy, your self-driving car could come with built-in insurance from Tesla, Waymo, or another automaker.

Hybrid policies

Until full automation arrives, policies may cover both human-driven and self-driving modes.

Autonomous vehicle endorsements

It’s still early days, but some Canadian provinces are preparing for self-driving coverage. Right now, Ontario and Quebec permit autonomous vehicles up to Level 3 to operate without joining pilot programs, and standard auto insurance policies extend to these vehicles.

Dedicated endorsements (add-on policies that cover things such as software glitches, failed updates, or autonomous system failures) are not yet widely available, although the industry expects unified policies covering both human drivers and autonomous systems to emerge as regulations catch up.

Premium impacts

Car insurance premiums are based on the level of risk that the policy poses to the insurer. Repairing and replacing high-tech sensors could lead to higher premiums in the short term, as even minor fender benders may require costly parts for repair. 

New risks

Self-driving cars rely on software, making them vulnerable to cyberattacks. Cyber insurance could become part of auto coverage to protect against hacking or system failures.

What do self-driving cars mean for drivers in Canada?

For now, owning a car in Canada means business as usual. 

You still need to:

• Compare car insurance quotes to shop for the best rate
• Follow self-driving car rules and regulations in your province
• Expect changes down the road

Within the next decade, auto insurance could look very different. Some experts predict personal auto insurance could shrink as liability shifts to manufacturers.

The bottom line

Self-driving cars are moving from concept to reality, but Canada is still in the early stages. For now, human drivers remain responsible for accidents and for buying insurance. However, as autonomous vehicles improve, liability will shift, and insurers, manufacturers, and lawmakers will need to adapt.

Also read:

• How collision insurance works in Canada
• 15 ways to get cheap car insurance in Canada
• What is the total cost of getting a traffic ticket in Ontario?